Category: Tips and Tricks

Cook Food – Save Money!

One of the reasons why I write this blog is because I have this deep-seated belief that someone out there might learn from my experiences and avoid making the same mistakes that I’ve made on my journey to wealth. I’m narcissistic enough to think that my words will have an impact if I share them on the Internet. So here we go…

Looking back on the choices I’ve made with my money, I can honestly say that one of my biggest mistakes is that I’ve never used my kitchen enough. I eat out – A LOT!!! I have a standing bi-weekly date with one co-worker. I go out with another friend every single week. There are impromptu lunch invitations which appear in my inbox, and I say yes to those far more often than I say no. I can count on one hand the number of times I’ve declined a lunch invitation! On top of those social outings, there are the many, many, many times that I’ve simply not brought a lunch and have gone to one or another of the fast-food outlets or restaurants located near my work.

On the plus side, I always pay cash for my meals. None of my meals has resulted in me staying in debt any longer than I have to. I can still accomplish my goals.

So why do I consider it a money mistake to not use my kitchen more often?

I view it as a money mistake because, most of the time, eating out isn’t the best use of my money. Now, my meals with friends and colleagues do allow me to socialize with people I love and respect. That’s wonderful and I don’t regret those meals.

However, when I have to go get a lunch to eat at my desk, I’m disappointed with myself. Money spent on those meals isn’t bringing me happiness or joy. I could have – should have – spent that money at one of the two wonderful grocery stores that lie between my parked car and my house. Twice a day, every day, I drive past two grocery stores. They’re bright, well-stocked, and very clean. The staff are friendly and helpful. Both stores carry everything I need to make myself healthy dinners, and thereby healthy leftovers for lunch the next day.

Even when I buy something healthy for lunch, I’m irritated with myself. For instance, I enjoy fruit so I occasionally buy fruit cups but this is still not a joyful purchase. I’m essentially paying double or more the cost of the same fruit at the grocery store. I’ve paid for someone’s labour to cut up the fruit, knowing full well that I have cutting boards and knives at home to do the same job. I’m contributing to the demand for plastic and other single-serve packaging, which is bad for the planet. Food from home is transported in reusable containers that are washed and re-washed many, many times before they break or otherwise need to be replaced.

And since this is a personal finance blog, I have to state as explicitly as I can that shopping at the grocery store is cheaper for me than it is to eat out for lunch! If I hit up a fast-food place, my wallet is atleast $9 lighter when I walk out. A sandwich from the grocery store is going to cost a lot less than a sandwich from the coffee shop. And if I want a drink to go with that sandwich, I’m looking at atleast $11. Try doing that 5 times a week – suddenly I’m spending $55 per week! Let’s say I go to a restaurant instead of a fast-food outlet. In my city, you can’t get a lunchtime meal for less than $20 after tip.

For $55-$100 per week spent on food, I’m better off going to the grocery store. A lasagna might cost around $27 to make once all the ingredients are purchased. (Your grocery store prices may be higher or lower. I live in an expensive province.) However, that lasagna will feed me atleast 5 times, bringing the cost per meal down to just over $5. Chain-store coffee in my city costs more than $5 if you go for one of the fancy ones!

And that’s just for lunches. I’m also very bad for mid-morning snacks. I leave my house by 6:30 am, which means I’ve eaten breakfast at 6:10 or so. My tummy starts distracting me around 9:45 or 10:15, so I invariably go down to the coffee shop for a muffin. I’m spending atleast $3.50 for that muffin! Thankfully, I don’t buy a coffee to go with that muffin or else I’d be spending atleast $5 for my mid-morning snack every day.

So what does all of this mean?

Essentially, it means that I’m a dum-dum for not doing some very basic meal-planning in order to cook tasty dinners that will generate enough food for the next day’s lunch. And, yes, I’m also a dum-dum for not baking some snacks for myself every weekend. However, Rome wasn’t built in a day and I know that I won’t kick all of my bad habits in a single blow.

The question I’ve had to ask myself recently is why should the fast-food places get my money instead of the grocery stores when it’s the grocery stores that best meet my need for tasty, healthy lunches & snacks?

Now that I’ve identified my money mistake, my next step is to stop making it in the future.

I’ve committed to reducing how much I spend on eating out. Time with friends over a meal is still very important to me so there will be no changes to that part of my budget.

The big change will happen on the days when I don’t have lunch plans. For those days, I will cook something delicious for dinner so that I have leftovers. Lasagna is a marvellous leftover food! I’ve also got a kick-ass recipe for Shepherd’s Pie. A few weeks ago, I discovered a recipe from www.allrecipes.com for something called Chicken, Sausage, Peppers & Potatoes – a wonderful one pot meal that easily accommodates additional vegetables if desired.

I will stop at the grocery stores two to three times a week so that I have the ingredients on hand to cook for myself. I may never learn to love grocery shopping, but it’s simply something I have to do to live my best life and to maximize the enjoyment that I get from my money. Am I still spending money? Yes, of course. Am I getting more enjoyment out of my money? Hell, yes!!!

It took a long time for me to come to this realization but I’m finally convinced of its truth. Cooking and baking my own food is a highly effective and utterly delicious way to satisfy my hunger and to save money at the same time.

52-Week Savings Challenge!

Christmas 2018 has come and gone, which means that a brand new year is nearly upon us. Does anyone else wonder how an entire year can pass by quicker than two shakes of a lamb’s tail???

And does it also not seem like the holidays cost money every single year? I don’t know about you but I rarely ever wake up in mid-December and say to myself: “Self, it’s a good thing that I found that mysterious pot of money in the closet the last time that I was putting away the vacuum cleaner – I’ll need that money for this year’s celebrations!”

Nope! I have never – not even once – had that particular conversation with myself. I’ve always managed to fund my Christmas celebrations with cash, but I’ve never made a challenge out of it. And this 52-week savings challenge will ensure that I have more money than I usually do for the festivities of 2019.

For those of you who enjoy having extra money kicking around, I thought that the following chart might be of assistance in helping you to figure out how to fund your goals for 2019. I discovered this wonderful little nugget during my forays through the labyrinth of the Internet so I can’t take credit for inventing it. Happily, I found this particular gem at Clever Girl Finance.

The following chart burrowed its way into my memory and I decided it would be a good one to share with all of you. I know I can’t be the only one who likes to pour herself a nice glass of wine, settle in on my couch with my journal and favorite pen, and set about writing down my financial goals for the upcoming year… Or am I?

It hardly matters. One of next year’s goals is to ensure that I continue to pay for all of my Christmas expenses with cold, hard cash. This challenge will help me to achieve this particular goal. As a matter of fact, it will give me ample cushion since I rarely ever spend more than $600 on Christmas! Such is a benefit of coming from a small family that is slowly moving towards a less-is-more attitude when it comes to gifts. While my brother wants to eliminate the gift exchange entirely, my mother still likes to receive things. My sister-in-law and I are of the same mindset – consumables are best! Baking and wine are perfectly fine presents. 🙂

The concept behind the challenge is simple. There are 52 weeks in a year. Your assignment – should you choose to accept it – is to save an amount of money equivalent to, or more than, the number of the week of the year. By this time next year, you’ll have over $1,300 sitting somewhere waiting to do your bidding. It’s not a complicated challenge, but it does require that you engage in a wee bit of self-control to make sure that you squirrel away the requisite amount of money each week and that you don’t spend it before the 52 weeks are gone.

If you’d like to hit a higher target, then double or triple the weekly amount. There’s no rule saying that you can’t save more. Stretch yourself to see just how much you can set aside. After all, if you wind up saving …<cough>… too much money, you can always get a head-start on another goal that will no doubt require money.


WeekDeposit AmountAccountBalance WeekDeposit AmountAccount Balance
1$1$1 27$27$378
2$2$3 28$28$406
3$3$6 29$29$435
4$4$10 30$30$465
5$5$15 31$31$496
6$6$21 32$32$528
7$7$28 33$33$561
8$8$36 34$34$595
9$9$45 35$35$630
10$10$55 36$36$666
11$11$66 37$37$703
12$12$78 38$38$741
13$13$91 39$39$780
14$14$105 40$40$820
15$15$120 41$41$861
16$16$136 42$42$903
17$17$153 43$43$946
18$18$171 44$44$990
19$19$190 45$45$1035
20$20$210 46$46$1081
21$21$231 47$47$1128
22$22$253 48$48$1176
23$23$276 49$49$1225
24$24$300 50$50$1275
25$25$325 51$51$1326
26$26$351 52$52$1378

Happy New Year, Everybody!!!

Bi-Weekly Payments vs. Semi-Monthly Paycheques

One of the easiest ways to cut down the amortization of a mortgage is by making bi-weekly payments. A bi-weekly payment is one where, every two weeks, your mortgage lender makes a withdrawal from your bank account for the purpose of paying your mortgage.

 

If you’re paid on a bi-weekly schedule, then there’s absolutely no issue with having your mortgage payment come out of your bank account the day after you’re paid. Money comes in – mortgage goes out. Easy-peasy for all concerned!

 

However, there are those folks who don’t get paid on a bi-weekly schedule. They might be paid monthly, with a mid-month advance. Perhaps they receive a mid-month advance and the bulk of their paycheque is paid at month end. For these people, a  bi-weekly payment plan has to be structured a little bit differently so that they can still save interest on their mortgage debt by decreasing the amortization period.

 

1. Open a second chequing account at Simplii or Tangerine. This will become your mortgage account. 

 

These are online bank accounts that are free.

 

If you are paid monthly and that you receive a mid-month advance, (or even if you’re only paid once a month), arrange to have your mortgage payment deducted from your mortgage account instead of from your current bank account.

 

Since there are 52 weeks in a year, the bi-weekly plan means that 26 payments are made to your mortgage every year. There will be two months in the year where the mortgage payment will be debited three times in the month. However, you will not be paid three time in that month since your employer only pays you twice a month.

 

You’ll need the mortgage account so that your current account isn’t debited unexpectedly, which will mess up the rest of your finances. At this point, you may be wondering how your finances might get messed up with the bi-weekly mortgage payment.

 

Bi-weekly mortgage payments will not always coincide with the days on which you get paid. If you decide to implement my suggestion, the mortgage account will always have a buffer of 2 (hopefully more!) mortgage payments sitting in it. So long as you automatically transfer money into your mortgage account from your mid-month advance and from the remainder of your monthly paycheque, the mortgage balance will be paid down every two weeks without fail because your lender will simply withdraw your mortgage payment from your mortgage account.

 

Do not use your mortgage account for anything else, except your annual property taxes and house insurance. Set up an automatic transfer from your chequing account to your mortgage account to cover the costs of taxes and insurance. This way, the money’s in place when you need it and you won’t have to touch the 2-month buffer of mortgage payments.

 

2. Do not use the lender’s bank account unless it’s free for life.

 

If you’re getting a mortgabe through a bank instead of a mortgage company, the bank will want you to use their bank products. They might even tempt you with one or two years of a free chequing account. My suggestion is to not take their offer. After the first year or two of free banking, you’ll have to go back to paying banking fees unless you’re wiling have $1500 or more held ransom for the privilege of free banking. What I call a ransom is what banks calls a “minimum monthly balance.”

 

I strongly suggest opening your mortgage account at one of the free online banks, Simplii or Tangerine. You don’t have to pay any bank service fees for any of their accounts, which means you don’t have to keep a minimum balance in your accounts to avoid bank fees. (I am not getting paid for this recommendation.)

 

And if you’re already banking with Simplii or Tangerine, then so much the better!

 

3. Figure out how much your mortgage payments will be.

 

You can figure out your anticipated mortgage payment with an online calculator. I say “anticipated” because the actual mortgage payment amount will be finalized on the day that you sign your mortgage documents.

 

BMO has a pretty useful calculator: https://www.bmo.com/main/personal/mortgages/calculators/payment/  (Again, I’m not receiving any compensation from BMO for recommending this calculator.)

 

When using this calculator, be sure to choose the option for determining the accelerated bi-weekly mortgage payment amount. This bi-weekly amount will come out of your mortgage account every 2 weeks once your mortgage is up and running. Take that bi-weekly amount and multiply it by 26, to get the annual total amount of your mortgage payment. Then divide the annual total amount by 24, since you receive your paycheque in 24 instalments over the year. This new amount, i.e. 1/24th of the annual total amount, is the amount that you should be automatically transferring to your mortgage account each time you get paid.

 

You can also pro-rate the transfers if it’s easier on your budget. If you receive 1/3 of your monthly pay at mid-month, the transfer 1/3 of the new amount on the 15th of the month. The remaining 2/3 of the new amount can be transferred at month-end or at the beginning of the month, whenever you get the bulk of your paycheque.

 

The sooner you start automatically transferring money to your mortgage account prior to taking possession of your new home, the bigger a cash cushion you’ll create.

 

Ideally, you start funding your mortgage account via automatic transfers from your current bank account before you even get your mortgage.

 

Why? It’s best to have a buffer of atleast 2 mortgage payments sitting in your mortgage account before the mortgage starts. Taking this step will allow you to adjust the rest of your budget to accommodate your mortgage payments. You’ll have had, at a minimum, 2-3 months to adjust to the impact that your mortgage payments will have on the rest of your financial goals.

 

4. The reason for this suggestion.

 

Why am I suggesting this method of payment? And why am I suggesting that you start now?

 

Again, it’s because your bi-weekly mortgage payments will not always coincide with the days on which you get paid. The mortgage account will always have a buffer of 2, or more, mortgage payments sitting in it. So long as you automatically transfer money into your mortgage account, the mortgage balance will be paid down every two weeks without fail.

 

I want you to pay the least amount of interest possible on your mortgage. To do that, you need to be paying down your mortgage every two weeks. (There’s also a weekly option but I don’t really like that one.) Every time you make a mortgage payment, you’re reducing the principal balance of your mortgage. Every dollar of principal that is paid off is a dollar on which you will never again pay interest.

 

Shaving years off your mortgage means less interest going to the bank because that money stays in your pocket!

There’s no need to pay interest on your credit cards!

I want you to know that I use credit cards. Frankly, I love the convenience of them. When I don’t have time to run to the bank machine to grab some cash, it’s very comforting to know that I can slide my credit card out of my wallet and still buy whatever it that I need at the moment. Credit cards are a seductively easy way to replace cash when it comes to paying for everything legally available under the sun. There’s no annual fee to worry about and I even earn rewards for using my card. The cherry on my sundae is that I earn points towards free groceries – score!

 

The only negative that I’ve been able to associate with credit cards is the manner in which they facilitate debt problems. In other words, they make it ever-so-easy to get caught in the debt trap. See, when the bank issues you a credit card, the bank sets a limit on how much you can spend. And when you get close to that limit, the banks will increase limit so that you can continue to buy-buy-buy. From what I’ve observed with my own credit cards and the credit lines of others in my circle, the limit that is assigned to your card is completely and utterly divorced from the amount of disposable income that you have each month with which to pay off your credit card balance when the bill comes due. I used to have a $9,000 limit on one of my cards! I can assure you that I do have $9,000 each month that can be put towards my credit card.

 

Credit cards are here to stay. Let’s face it – society is not moving en masse back towards cash. There are the diehards who only use cash, and their numbers are dwindling. The last time I was at the airport, I noticed that passengers must use a credit or debit card to pay for their baggage fees. Excuse me? How is it possible that the words “Legal Tender” don’t apply at the airport?

 

The cornucopia of credit cards is not going to disappear anytime soon, but that doesn’t mean that you have to pay interest for the privilege of using them. Use your credit card as much as you want, but ensure that it is paid off in full by the due date. There are multiple ways to do this.

 

There’s the Traditional Method: the statement arrives, you see the balance, you pay the balance in full. This method is old-school. It’s incredibly effective. I don’t know of a single person who has been charged a penny in interest by paying their credit card balance in full before the due date. The banks lend you money via your credit card, then they ask to be re-paid if you use it. When the bill comes in, you repay the bank their money. Everyone’s happy and you get to do it again the following month. The Traditional Method works like a charm.

 

There’s my Obsessive Compulsive Method. I use my card. I check my account online. When the charge is posted, then I know that I will get the points for my purchase. I then go to my bank account and make an online payment for the charge in full. This method ensures that my credit card statement shows a balance of $0.00 by the time it’s sent to me. The OCM is a bit more time-consuming but it ensures that I don’t forget to pay my bill due to other stuff going on in my life. I have the satisfaction of knowing that all of my charges are paid off before the statement is issued – there are no debts hanging over my head.

 

Very recently, I learned about a third method – the Disposable Income Method. It involves pre-determining how much money from your paycheque to allocate to your credit card each time you are paid. You then tell your credit card company to set your credit card limit at this amount. You also tell them to freeze your credit limit, which means that they cannot raise your limit unless you ask them to. Then you use your card in the normal course and you pay off your credit card in full from each paycheque.  For example, if you know that you can pay $1000 to your credit card account from your paycheque, then you arrange for the limit on your card to be $1000. When you get paid, you pay $1000 to your credit card. You credit card bill gets paid in full and you never carry a balance, which means that you’re not paying interest to your credit card company.

 

This third method has many benefits.

 

One – You never spend more than you can pay off in one paycheque. I will venture to say that most people with five-figure credit limits are not in a position to pay off their five-figure balances in full each month. This is why they carry a credit card balance and why they pay interest on their credit card balances.

 

Two – You will build your credit history quickly. There will be a solid record of you borrowing money on your credit card and paying it back promptly.

 

Three – You can still collect point or airmiles or free food, or whatever benefit it is that you card offers. You can still spend money however you want to, just like you did before. However, you’ve taken the very adult step of ensuring that you’ve prevented yourself from spending more money than your budget can handle.

 

Four – If your credit card is used fraudulently, then the damage that is inflicted is limited to a relatively small amount of money, i.e. the pre-determined amount that you can pay from your paycheque. The criminals cannot go hog wild with your card.

 

And if you’re already in debt, the answer is to stop using your cards. With rates pushing 30%, there’s no way that you can get yourself out of debt while still accruing interest charges on your credit cards. And if you’re paying 30%, then you might as well light your money on fire for all the good that it’s doing you. Paying interest is giving money away to the bank. That money should be in your pocket, not theirs!

 

You’ll need to go on a cash diet, while making payments to your credit card. Pick an amount – higher is better – and pay that amount to your credit card every single month until your card is paid off. Do not make any charges on your card! This means, you stop all auto-pays on your credit card. Why? Auto-pays are new charges, against which interest will be charged until you’ve paid off your debt. You will pay for your life with cash until you get out of debt. And if you have more than one credit card, you will continue this process until all of them have balances of zero. Check out the Snowball Method for detailed instructions on how to get out of credit card debt.

 

Once you’re out of debt, you won’t be paying interest to the bank anymore. You can use your credit cards again, but only if you are committed to one of the three payment methods.

 

All three of these methods work to keep you from paying interest on your credit cards. Pick one of the three methods outline above – all equally effective – to ensure that you don’t pay any interest to the banks. You can even combine them if you’d like. By following any or all of these three methods, you’ll pay for what you’ve purchase and not a penny more!

 

Pay cash for your cars

Buying a new vehicle is not a decision to be undertaken lightly since the financial ramifications can put a serious crimp in your cash flow for a very long time if you’re not careful.

Check out this article on how Canadians are taking out lengthy car loans to minimize the monthly payment. Think about it for a minute. Canadians want expensive vehicles and they’re willing to finance them, but the required minimum monthly payment over a 5-year period is simply too much for their budgets to bear so they agree to repay the loan over 7, 8 or even 9 years! These kind of lengthy repayment periods are lunacy! Like eating too much of your favourite dessert, long-term loans promise delight in the short-term and guarantee regret over the long-term.

Vehicles are expensive! A brand-new pickup truck in my corner of world can run $70,000 or more. Brand new SUVs start around $25,000. Luxury sedans start at the $39,000 mark. Even on the second hand market, a nice vehicle with fewer than 100,000kms will run you atleast $10,000. I’ve seen financing offers last as long as 96 months for new vehicles – 96 months is 8 years! It should never take anyone 8 years to pay off a car loan. Depending on the driver, a vehicle may need to be replaced at the end of the 8 years and the whole cycle of paying a car loan has to start again. Or, even worse, a vehicle may have to be replaced before the loan period expires and the old loan value has to be rolled into the loan on the next vehicle.

I’m here to tell you that there is a way to live without car payments, to go years without ever having a car payment while driving cars that you can afford. This fool-proof alternative path to vehicle ownership completely eliminates the need for financing. It’s called paying cash for your vehicle by saving the money before you buy. It’s not a particularly popular method, and the car dealerships will never advocate for this method. You can rest assured that the Ad Man and his trusty sidekick, the Creditor would have fits if great swaths of the population decided to follow this method for purchasing motorized transportation. Yet, I guarantee that this method will work for you every single time. If you save up to pay cash, you will benefit twice by acquiring a vehicle without acquiring any payments!

Nearly twenty years ago, a woman from a book club to which I belonged gave me advice about how to buy a car. It was exceptionally good advice, which is why I still remember it. She said that her grandfather had taught her how to pay cash for all of her vehicles. I was most intrigued!

Essentially, the advice was to save the equivalent of a car payment in a separate account until the next desired vehicle could be purchased with cash. At the time, Book Club Lady was setting aside $350 each month in a bank account dedicated to buying her next car and she planned to do so for five years until she had enough to buy her next vehicle in cash. Bingo-bango! At $350 per month, she’d have $21,000 in place to buy her next vehicle in 5 years. And after she purchased her vehicle, she would continue to set aside the amount of money (or more if she wanted) in the bank so that she would be in a position to pay cash for the next vehicle. Technically, one could argue that she was still making a vehicle payment but so what? The fact was that Book Club Lady was making a payment to herself and she wasn’t paying any interest on a car debt.

How many of us prefer to finance a car and pay interest to a creditor? Don’t be shy! Raise your hand. Yes, you’re in good company. Car companies make oodles of money through their financing divisions. Why? Somehow, we as a populace have decided that cars are to be replaced and upgraded regardless of whether they are still roadworthy. Replacing one financed vehicle with another one is far more important to us, collectively, than preserving our money for a period of time and buying something outright with cold, hard cash.

I speak from experience. I’ve twice bought brand-new vehicles. The first one was held for 7 years, and I took the full five years to pay it off at a rate of $325 per month. The second one still sits in my garage, 10 years old this year. I was smarter the second time around as it only took me 6 months to pay off the loan. Despite the wise advice of the Book Club Lady’s grandfather, I financed both of my cars and didn’t give a single thought to setting aside my former car payment so that I could buy the next car in cash.

Let’s face it – vehicles cost money to buy. We can either pay a lender to finance the vehicle, or we can put ourselves in the shoes of the lender and simply pay the same amount to ourselves. Either way, we’re still getting a vehicle out of the deal.

My 10-year old SUV is not going to run forever, so I’ve finally started a dedicated vehicle-replacement fund. Every two weeks, $250 from my paycheque is set aside for the purpose of buying my next vehicle. I’ve committed to driving my SUV until the wheels fall off, so hopefully they stay firmly in place for atleast the next 5 years. If my SUV fails me before my chosen time, the money in my vehicle replacement fund will serve as a good down payment on the next vehicle or it might be enough to buy me something that I don’t completely and absolutely love but can live with until I have enough cash to get what I really want.

“So how do you get the first vehicle without financing it?”

Good question. The first option is to figure out how to live without a car – ride a bike, take public transit, walk, Uber. Some of these options might work some of the time, but they’re not all free. I harbor no illusions that everyone can live without a car. If you’re a person who needs a vehicle to live the life you want, then you might be stuck with financing the first car. But that doesn’t mean that you finance the best car available! It means that you finance the cheapest car you can find that meets your basic needs. You keep that car payment as low as possible so that you can shovel money into the vehicle replacement fund.

Let’s say you finance a $5,000 over 3 years at 2.99%. Your car payment budget is $350 per month but your required car payment over three years is only $85. You’re not thrilled with the vehicle but it safely takes you from A to B, which is really all a vehicle is supposed to do for you. While you’re paying $85 on your car loan every month, the other $265 (= $350 – $85) is going into your vehicle replacement fund.

At the end of three years, you have $9,540 (= $265 x 12months x 3 years) in the bank to go towards a new car. You can either buy a new vehicle for $9,540 or you can keep driving the first $5,000 car while socking away the full $350 into your car replacement fund. Since the car loan ended after three years, that $85 dollar payment can now be paid to yourself instead of to the lender. If you save $350 per month for two more years, you’ll have $8,400 which can be added to the $9,540 already in place, giving you a total of $17,940 in the bank to buy your next vehicle in cash.

Alternatively, you decide to pay off the 3-year car loan as quickly as possible. At $350 per month, your $5,000 car loan is gone in 14 months. At that point, you continue to pay that $350 to yourself while you get accustomed to a life without debt. At the five year mark, which would be 46 months later, you’d have $16,100 (= $350 x 46 months) in the bank waiting to go towards your next vehicle.

To my way of thinking, you should keep driving the $5000 vehicle until the wheels fall off! In the meantime, you continue to squirrel that $350 away every single month until you need to buy another vehicle. However, some of you will want to get rid of the $5000 car as soon as you can. Who am I to stop you? You’re an adult so buy whatever you want. Just make sure that you pay cash!

Cutting the Cord

In 2015, I decided to eliminate my subscription to cable TV.

Was it easy to do cut the cord? NO! It honestly took me close to a year to call my cable provider to cancel my subscription. It took me another 6 weeks to return my cable box and the various cords that connected my TV to the world of limitless channels, endless commercials, and the repeated experience of there being nothing on TV that I wanted to watch.

That first Sunday without The Walking Dead was torture. I was very consumed by thoughts of Rick and Darryl and Maggie and Glen and Michonne and Carl, and the many other hangers-on who hadn’t yet been killed by the zombies. Fear not, Dear Reader! The human mind is such that nearly any change can be accommodated once it has been in place long enough. By my third cordless weekend, I was asking myself why I’d ever cared so much about fictional characters who were being chased by zombies. Amazingly enough, my life was still completely satisfying without knowing all the details of the challenges, tribulations and triumphs of the merry band of imaginary folks who devoted their time and energy to avoiding the jaws of the ravenous undead.

So why did I get rid of cable?

Believe it or not, my reason for doing so wasn’t driven by my budget. I have the money to pay for cable television but I chose to cut the cord anyway.

My choice to eliminate cable was driven by my spending priorities, one of which is to not spend money on things that don’t make me happy. Many TV shows are simply garbage – I no longer wanted to pay for garbage. In the same way that I wouldn’t spend money at the grocery store on rotting meat, I didn’t want to direct my hard-earned money to the purchase of subpar television shows.

Despite the increase in diversity on TV (yay!), the vast majority of the plot lines continue to be unrealistic (boo!).  I cannot relate to them. The storylines are not reflective of my life or my priorities, so I was no longer invested in the characters or their particular challenges and conflicts. I found myself watching TV to solely kill time – I definitely wasn’t being entertained! I’m not likely to be engaged in a foot pursuit of bad guys down busy streets, nor will I be trying to uncover various conspiracies week after week. Everyone in my world is human so plot lines with extra-terrestrials or mythical creatures aren’t always relatable to me, although they can admittedly prove to be entertaining every so often. As for sitcoms and rom-coms, they generally wear thin after sooner or later since there are only so many ways for the they-used-to-hate-each-other-now-join-in-the-celebration-of-their-wedding-story to be told.

For example, I love Grey’s Anatomy! As with everyone on television, except the news, the people populating the screen are exceptionally attractive. The good doctors at Grey Sloan Memorial Hospital are forever finding empty closets or lounges at the hospital where they can have sex with each other. And when the hospital is full, they’re inclined to have sex in their cars in the parking lot. More often than not, I wondered how the hospital wasn’t sued for sexual harassment every week. In my world, my employer has very strict rules against sex in the work place!

The questions that I had about the characters were never asked or answered. Specifically, I could never stop wondering about the money aspect of Grey’s Anatomy. Exactly how much did the doctors earn as they progressed through their residencies? How did the hospital make money as a private business? Most importantly, how did their emergency room patients pay for their treatments? No one ever asked them about insurance or sought any kind of payment, yet they received topnotch care from everyone at the hospital for weeks or months on end depending on the storyline. Did they all have supremely good health insurance? On top of the compellingly-written storylines and their associated emotional traumas, were any of the patients or their families thinking about the money?

One of the more beautiful aspects of TWD is that money was no longer a concern so I easily believed that those folks had no financial worries. One season, they even found a newly-built subdivision that had been completed just before the zombie apocalypse so everyone was able to move into a brand-new beautiful home without the hassles of saving for a down payment, arranging for financing, and paying to hook-up their utilities. Even for a show about zombies, this was a bit un-realistic.

Have no fear – I still watch TV. I simply do so on Netflix and CraveTV.

Truth be told, I can consume most of the same programming for a much cheaper price through Netflix and CraveTV. (And if I ever learn how to stream over the Internet, I’ll be able to watch even more shows!) It’s simply smarter to pay the lower amount for the same thing. I looked at cable television the same way that I looked at toilet paper prices. If one grocery store has the same brand on sale for a lower price, why would I go to a different grocery store to pay more? My favourite shows on Netflix are the same whether I’m paying several hundred dollars a month to a cable provider or whether I pay $11 per month to Netflix. Why pay more for the same product?

The exact same shows on Netflix are devoid of advertising. Hooray! I’m now able to watch an episode of my favourite show from beginning to end without the interruption of loud commercials at critical points. Of course, there’s nothing to be done about the embedded advertising within the TV program itself. As a result of consuming fewer commercials, I find that I’m also a lot less inclined to go shopping or to believe that my life is sorely lacking because I don’t purchase a particular shampoo. For me, consuming less advertising translates directly into consuming less stuff. How awesome is that?

And while my decision to cut the cord wasn’t motivated by money, I cannot ignore the fact that saving over $100 per month has been very good for my other financial priorities. Since cutting cable, I’ve saved atleast $3400. It might even be more since I’m sure that my former cable provider has implemented a couple of price increases since 2015 when we parted ways.

And what did I do with that extra $100 per month? Like I said, fewer commercials has translated into less shopping. My former cable TV payment was re-allocated within my budget. I used some of it to pay for my Netflix subscription and I used the rest of it to increase the amount of money that I contribute to my retirement and investment funds.

How about you? What would you do with the money that you’d have if you were willing to cut the cord?

The Fund & the Index

The first time I learned about a F*ck You Fund was when I read an online article from Paulette Perhach. I was blown away by the idea and immediately went to my own numbers to see if I had inadvertently created such a fund of my very own. Short answer – yes, I have!

 

Props must also be given to one of the grand-daddies of the financial independence moment, J. L. Collins, who gifted the world with this wonderful article about F*ck You money and why everyone should have some. Mr. Collins also shared this delightful and instructive video on the importance of being in the position to say “F*ck you!”. This video is not safe for work, nor is it particularly suitable for children. However, it is very suitable for anyone who is looking to ensure that they have options for walking away if the need should arise.

 

A few months ago, the wise couple known online as FireCracker and Wanderer at www.millenial-revolution.com posted an article about how money in the bank limits your employer’s ability to f*ck you over. I’ll call it the Index. In short, there is a strong suspicion among those of us who have worked for a long time that employers are more inclined to exploit employees who don’t have the option of walking away. The exploitation might be job-related, as per the charmer interviewed by Wanderer in his article, or the exploitation might be of the illegal variety, such as the various forms of harassment that are no doubt experienced by countless employees who cannot simply walk away from their paycheques.

 

Both of these ideas were incredibly powerful to me! I’ve been pursuing financial independence for a very long time because I want to know that I don’t need my job to survive. I want to know that I can take care of myself without having to put up with intolerable situations at work. Thankfully, I work in a bright office with smart & friendly people and I get to solve challenging problems for a great salary so I haven’t felt the need to storm out of the building while giving everyone the double-birds…yet.

 

No one knows what tomorrow will bring, right?

 

Having a decent-sized F*ck You Fund provides me with a sense of peace about my decision to go to work every day. I don’t have to go. I can quit and bum around for a little while before finding another position. If the circumstances warranted it, I could take a dream job for a drastic cut in pay and still reach my retirement goals thanks to having met my Coast FI number. Building this particular pot of gold one dollar at a time alleviates the frustration that I sometimes feel at work because I know that I don’t have to stay – I don’t feel trapped because I know that I have options! Even if I never have to storm out of my office, it’s very comforting to know that I would be okay if I did.

 

I would suggest that you create a F*ck You Fund for yourself, if you haven’t already. Unlike an emergency fund, the fund gives you options beyond mere survival if you find the need to part ways with your current employer. It puts a little bit of power back into your hands so you can say “No” to your employer when it’s reasonable to do so without having to worry about how to put food on the table and a roof over your head. This is where the Index comes in. You’ll gain the confidence of knowing that you won’t have to eat whatever crap is dished out your way because you will have a feasible option for taking care of yourself until you find your next job. Near as I can tell, the size of your fund has an inverse relationship to the amount of grief and misery that you’re willing to put up with at work. The more F*ck You money that you have, the less poop you have to eat.

 

Please do not mistake an F*ck You Fund for being financially independent. Being FI might mean never having to work but a F*ck You Fund definitely means never having to work for a jackass. The distinction is subtle, but ever so important.

Building an Army of Little Money Soldiers

One of my life’s goals is to build a nice, solid flow of passive income without getting a second job. The way I decided to do this was by building an investment portfolio using a dividend-paying exchange traded fund (ETF). I think of the individual units in my ETF as Little Money Soldiers whose sole purpose is to acquire more and more dividends for me every month. The dividend income that I earn can be used any way I want, and right now I want it to fund my dream of financial independence.  Every single month, I add to my army of Little Money Soldiers by buying more units in my ETF and I send them out into the world to do their thing – they do it well. I don’t have to do anything beyond sticking to the plan of contributing to my portfolio regularly and watching my dividends grow. My Little Money Soldiers do the rest.

As a Singleton, my paycheque is the primary source of income in my household. Years ago, I’d heard about how smart couples of means would live on one income and bank the other. Ideally, the really well-off couples would bank the higher income and live off the smaller one. I envied such couples! The reality was that I was not in a position to live on 50% of my take-home pay. I wasn’t willing to live that close to the bone because I wanted to be able to socialize with my friends each month and do some travelling. When I learned about dividend income and started doing some blue-sky dreaming about how dividends could be used to supplement my income, I couldn’t buy them fast enough!

Dividends are a second income in my otherwise single-income household. Unlike married people in a single-income household, I don’t have a partner who can go out and earn some money if my main income source dries up. My monthly dividend income is financially akin to having a partner with a part-time job. If I were to lose my paycheque, my dividends could help me survive from one month to the next. Obviously, I would lose the benefit of the dividend re-investment plan (DRIP) because I would need the dividends to pay for my absolute necessities while I looked for employment. As a single person, the dividend income created by my Little Money Soldiers provides a certain level of psychological comfort because I know that, should I lose my current job, I will continue to have income until I find new employment and start getting a paycheque again.

Right now, my investment portfolio produces a part-time income. If I continue to invest on a regular basis and if I refrain from spending my dividends rather than re-investing them, then my investment portfolio will eventually produce a second full-time income for my household. I will have the financial benefits of an imaginary spouse/partner without the real-life drawbacks that come with sharing money with a sentient human. And unlike other side hustles that are regularly touted on the Internet, my army of Little Money Soldiers goes out to work on my behalf thereby allowing me to indulge my inclination towards laziness. I don’t have to do anything outside of my comfortable routine in order to earn this money. It’s all mine – it’s tax-advantaged – it’s automatic – it’s wonderful!

For the past 7 years, I have consistently been investing in dividend-producing assets. I’ve reached a point where I consistently receive a 4-figure dividend payment every month. And since I don’t spend the money, it is automatically re-invested on my behalf. (Check out this awesome article for a primer on how DRIPs are the next best thing since sliced bread: My dividend employee Steve.)

I was very lucky that my parents were interested in the stock market. Both of them invested on a regular basis so I knew that there was a way to make money without actually having to go to work. Of course, my six-year old brain didn’t quite grasp all the intricacies of what each call from my mother’s broker meant but he phoned on a regular basis. (As an adult, I’m quite convinced that he merely churned her account to generate fees instead of acting in her best interests to make money. Nowadays, my mother invests on her own through her self-directed brokerage account and she’s doing quite well!)

My father’s style of investing was much different. He introduced me to the concept of dividends, and bought me several shares in companies that are still around today. When I was in my early 20s, I opened my own self-directed brokerage account and used my initial principal to buy shares in the various Big Banks. Again, betraying my youth and lack of knowledge, my only criteria for which bank stocks to buy was whether the bank participated in a DRIP. If the answer was yes, I bought $1,000 worth of stock in the bank. To this day, those banks still pay me dividends every quarter. I freely admit that this wasn’t the smartest way to pick my investments, but I could’ve done a whole lot worse! Every one of those banks is still around and the stock price has grown over time. Buying those bank stocks was one of the best financial decisions that I’ve ever made, even if the reason underlying the decision was not well-founded.

As we all know, time waits for no one. I learned more and more about investing by reading books, internet articles & personal finance blogs. They were all consistent that the way to earn outsized returns was to be invested in the stock market. I had little interest in becoming a expert in the stock market but I appreciated that the best historical returns went to those who had equity investments. Buying stocks in companies that paid dividends meant I was investing in equity. Dividend payments were a passive way for me to earn money and to participate in the stock market – to me, it was the best of both worlds! I started contributing more regularly to mutual funds which paid me dividends, then I learned about ETFs and index funds and a light went off in my brain. Why should I willingly pay higher management expense ratios (MER) for my mutual funds when I could buy the same basket of assets through an ETF or an index fund for a fraction of the price?

So, after paying off my mortgage at 34 and becoming debt-free, I turned my focus to building my non-registered investment portfolio. I promptly found an index fund that paid out dividends every single month so it was time to say bye-bye to my mutual funds. I was still investing in dividend-paying assets but I would be paying a lower MER to do so. My new index fund would simply pull the money from my chequing account and the investment would be made. Making the switch was a no-brainer! I set up an automatic contribution from my paycheque to my index fund. My first index fund offered a DRIP feature and I was not responsible for re-investing those dividends into new units of the index fund every month. The dividends were DRIP-ped, i.e. automatically re-invested into more units of my index fund, rather than paid out to me in cash. It was fantastic!

Two years ago, Vanguard came to Canada and I started doing some investigating. Vanguard has very low MERs on their products. One of those products was an ETF that paid out dividends every single month, offered a DRIP feature, and had an MER that was much lower than the one on my index fund. This was a hat trick! I could get all the benefits of my previous index fund portfolio while saving money on the MER and accruing even more units of the ETF every single month. Sadly, Vanguard will not simply withdraw the money from my chequing account – I have to transfer money to my brokerage account. Big deal! For $9.95 a month, I’m paying a much lower MER and earning sufficient dividends which more than cover the cost of the monthly purchase. I spent 15 minutes opening my online account. Then I spent another 3 minutes setting up an automatic bi-weekly transfer from my paycheque to my brokerage account to fund each month’s purchase. I haven’t looked back. Every month, I buy more units in my Vanguard ETF after the last month’s dividend payment has been automatically re-invested.

Earning money through dividends is awesome. I don’t have to do anything other than purchase the underlying asset and the dividends flow to me every month like clockwork. In the words of my very wise hairdresser, it’s money that I don’t have to sweat for. What could be better than that?

Spend Some, Save Some

This most excellent advice came to me from a highly trusted source – my mother.

While we were on our most recent vacation together, I asked her what she believed was the most important lesson to learn about money. In four words, she summed up the cornerstone of every personal finance blog I’ve ever come across: “Spend some, save some.”

For those of you who already peruse PF-oriented blogs, you’ll immediately recognize this alliterative wonder as the admonition to always live below your means. Living at your means, and living above you means, always ends with the result of not having any savings set aside for investing. My mother’s four little words are the bedrock upon which all wealth is built.

Please do not let her mantra mislead you. I can assure you that my mother is is not some penny-pinching old lady who resents the fact that she has to open her wallet. My mother loves fun! She enjoys her family and her friends – she entertains and she travels. My mother is the one who advises strangers at the casino to bet big money, if they can afford it, in order to score the big win. At the same time, my mother doesn’t have a mortgage on her home – she follows the stock market more diligently than seminary students study the scripture – she is always “finding” money that she didn’t know she had. And how does she accomplish this day after day, month after month, and year after year?

The woman lives by her mantra – spend some, save some. My parents were not rich people and they were not university-educated. They were regular people who didn’t earn big money. They had the same struggles as everyone else in raising their family and meeting their goals. When I was growing up, my father put my mother in charge of the household finances. Every two weeks, he got paid and he would sign his cheque over to her. (Back in the day, banks would cash signed cheques without too much fuss. For those of us who’ve known online banking our whole lives, trust me when I say it was a different world – today, no bank would ever do this for its customers!) When his company went to direct deposit, my father’s paycheque went straight into my mother’s bank account and they never fought about money. I’m not being cagey – my parents never had a joint bank account. His money went straight to her bank account, as did the money she earned from her job. It wasn’t until my first full-time job, as a bank teller, that I even realized that joint bank accounts were actually a thing!

So, every two weeks my mother got my father’s paycheque. And every month, she would write out what bills had to be paid. The money came in, the bills got paid, the groceries were purchased, the mortgage was serviced, long-term & short-term goals were funded. It worked like clockwork. Both of them had pensions, but they still ensured that they put money away in their RRSPs every year. They also wanted my brother and I to go to university, so every payday meant that $10 from my father’s paycheque went into our bank accounts so that we could buy Canada Savings Bonds each fall to finance our post-secondary education. As an aside, that $10 bi-weekly contribution grew to be substantial enough to cover 6 years of post-secondary for me and 9 years of post-secondary for my brother. We grew up in the 80s when inflation was high and Canada Savings Bonds were paying double-digit interest rates. Tuition was a lot cheaper in the 90s when we went to school, so our parents “little” investment plan allowed them to achieve one of their biggest goals for their family.

What other benefits came along with the “spend some, save some” philosophy?  If there was an emergency, the money was in the bank to pay for it. Renovations were made to the family home. Birthday parties took place every year without credit cards bills hanging around. There was always money for a movie and snacks with friends. Money was set aside for retirement accounts and investing accounts. (Investment accounts generated dividends that were invested, never spent!) An annual vacation was a given in our household. We spent many an hour in the car driving all over the place to visit family and friends, and to see this great big country of ours. Every few years, we’d even take a trip by airplane. The “spend some, save some” mantra meant that there was a balance between spending money now and spending money later. It also meant that there was always money somewhere: in a wallet, in the bank, in a retirement/investing/emergency account, in the change-jar in the corner of our kitchen.

We live in a world where the AdMan is always, always, always exhorting us to immediately cave to temptation. We’re encouraged to spend every penny we have, and even those we don’t, right away. Personally, I believe that the relentless tide of advertising is one of the many factors leading to the debt burdens of so many people. Adopting my mother’s mantra to “spend some, save some” and repeating it to myself every day is one way to fight back against the tide. It wasn’t until I was grown up that I realized just how well my parents managed their money – they had mastered the art how to live day-to-day while simultaneously saving money for both short-term and long-term goals. Thankfully, I’ve learned to do the same.

What about you? Have you made it a priority to “spend some, save some” in your life?